Escrow Basics

When you purchase a bungalow or sell it, it requires a a complicated process. Since this process involves high financial value, therefore in order for the security of both the buyer and the seller, the process of Escrow comes in. This is a process in which the funds are deposited by the buyer with a third party and when all the paper work is done the seller hands over the documents to the third party who then finalizes the deal and hands over the required money/papers to the concerned party.

Independent Neutral Third Party

The escrow is an independent neutral third party who is often involved in such transactions of buying and selling property to secure the buyer and the seller from fraud. Following are the functions of the third party (Escrow)

Escrow Functions

  • Receives the money from the buyer which is then deposited into the escrow account. The paper’s are then received from the seller after all the terms and conditions have been met. Calculates all the expenses which would have to be deducted such as taxes, rent, insurance and interest if any.
  • Coordinates with the person who has lent the money to the buyer for making that transaction and allowing the purchaser to purchase the property. All the documents with the lender is sorted out hence receiving the installments of the loan.
  • After all the deductions have been made which have to be paid to the local authorities, the escrow holder passes over the money to the seller.

Functions of Lender and Sender

While the escrow performs their function, the lender and the seller also have some functions to perform. The lender would have to get all the documents processed in order for the loan to be processed for the amount required. On the other hand the seller would have to prepare the document for the transfer of the property in the name of the purchaser.


Therefore, in such transactions when property is buying, bought or sold, the role of escrow sets in which makes life easier for both the buyer and seller, saving themselves from a fraud.

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